As demand for behavioral health services surges across the nation, the industry is witnessing rapid expansion with new treatment facilities and programs emerging to meet the growing need. However, not all areas of health care are experiencing the same growth. The skilled nursing sector, in particular, has been facing continued financial hardship, declining occupancy rates, and—in many cases—facility closures.
Amid these struggles, an unexpected opportunity has emerged for behavioral health providers: the repurposing of underutilized or shuttered skilled nursing facilities into behavioral health treatment centers. While this strategy is still in its early stages, it’s quickly gaining traction across the country as providers look for cost-effective ways to expand their services and access local communities.
Why Behavioral Health Providers Are Eyeing Nursing Home Real Estate
Behavioral health providers are increasingly targeting former nursing home properties as ideal locations for treatment centers, particularly those focusing on substance use disorders and mental health care. These buildings already possess many features that lend themselves well to residential treatment or transitional care, such as:
- Private or semi-private rooms
- Common spaces for group therapy or community gatherings
- Medical infrastructure for medication management and health monitoring
- Kitchens, dining areas, and recreational spaces
Additionally, since many nursing homes are designed to accommodate long-term or semi-permanent residents, these facilities can often be adapted without extensive structural modifications.
The most attractive factor, however, is cost. In many cases, struggling nursing home owners are eager to sell, often at prices significantly below market value. This has opened the door for behavioral health operators looking for affordable real estate to expand their reach.
Sabra Health Care REIT (Nasdaq: SBRA), a leading health care real estate investment trust, has publicly supported this strategy. Sabra’s Chief Investment Officer Talya Nevo-Hacohen recently told Skilled Nursing News that skilled nursing facilities and other residential-type buildings are prime candidates for conversion into behavioral health centers.
“You can modify any building that is residential in its nature—whether it’s student housing or senior housing or skilled or an LTAC [long-term acute care hospital],” Nevo-Hacohen said.
Recent Examples of Nursing Home-to-Behavioral Health Conversions
Across the United States, several notable examples have emerged that highlight this growing trend:
Darrin’s Place in New Mexico
In Espanola, New Mexico, a shuttered nursing home is being transformed into Darrin’s Place, a new behavioral health facility specializing in substance use disorder treatment. Formerly known as the Espanola Valley Nursing and Rehabilitation Center, the site is being reimagined with support from local government and federal funding.
According to reports from the Rio Grande Sun, the facility will offer a broad range of services, including:
- 12-step meetings
- Medication management
- Group and individual therapy
- Other structured recovery programs
Once operational, Darrin’s Place will have the capacity to serve around 100 individuals. Financial backing from Rio Arriba County, along with a $500,000 Community Development Block Grant from the U.S. Department of Housing and Urban Development (HUD), has been secured to help cover renovation and operational costs.
The new facility is scheduled to open by June 2020, with modifications such as added security features—including fencing—to deter illegal drug use.
Daniels House in Massachusetts
In contrast, not all conversions have been met with enthusiasm. In Massachusetts, a plan to convert the Daniels House nursing home into a sober living facility by Process Recovery Centers stirred controversy among local residents.
Community members voiced concerns at a recent town board meeting, citing fears about safety and the proximity of the facility to a local library frequented by children. While Process Recovery Centers has emphasized the importance of sober homes in offering transitional support, the pushback illustrates one of the biggest hurdles for these types of projects—neighborhood opposition.
Despite resistance, these conversions continue to gain momentum in regions where demand for behavioral health services far outweighs available resources.
Core Health’s Transitional Housing in Washington
In Longview, Washington, Core Health seized the opportunity to purchase the closed Park Royal Nursing Home for $625,000. The organization plans to convert the facility into transitional housing for homeless individuals who have mental health conditions or physical disabilities.
Unlike traditional shelters, this facility will operate under a classification of “assisted living and congregate care.” Core Health intends to provide a more supportive, stable environment for up to 75 residents who need longer-term assistance, offering services such as:
- Social Security benefits coordination
- Permanent housing assistance
- Case management for mental and physical health needs
Residents may stay for as long as two years, with the facility employing around 30 staff, including nursing assistants and administrative personnel.
Core Health will need to apply for a “change in use” permit before fully repurposing the site, according to local reports.
Opportunities and Obstacles in Converting SNFs to Behavioral Health Centers
The examples above demonstrate both the opportunities and the challenges associated with this emerging trend.
Opportunities:
- Cost Savings: Repurposing existing structures is often far less expensive than building new facilities from the ground up.
- Quick Turnaround: These buildings are typically already suited for residential use, making it easier to convert them into treatment centers relatively quickly.
- Community Integration: Locating treatment centers within communities, rather than in remote “destination” areas, helps address local needs and reduce barriers to care.
- Government Support: Federal, state, and local funding programs, such as HUD block grants, can help offset conversion costs.
Challenges:
- Neighborhood Pushback: Community resistance, often driven by stigma around addiction and mental illness, can delay or derail projects.
- Regulatory Complexity: Zoning laws and licensing requirements for behavioral health facilities vary by state and can complicate conversions.
- Ongoing Operating Costs: While acquisition costs may be low, ongoing operational costs for staffing and care delivery remain significant.
The Future of Nursing Home Conversions in Behavioral Health
As financial pressures continue to mount in the skilled nursing sector, more properties are expected to become available for purchase or lease. At the same time, the demand for behavioral health services—including mental health treatment, substance use recovery, and supportive housing—is likely to continue growing.
Industry observers believe this trend of SNF-to-behavioral health conversions will accelerate, especially in markets where local governments and communities recognize the need for expanded behavioral health resources.
Still, success will hinge on thoughtful planning, community engagement, and navigation of complex regulatory environments. For behavioral health providers, these conversions offer a unique opportunity to expand access to care while breathing new life into vacant facilities.
As the health care landscape evolves, turning yesterday’s nursing homes into tomorrow’s treatment centers may prove to be one of the most innovative ways to address America’s behavioral health crisis.
